Reserve requirements imposed against bank deposits, nominal interest payments on bank reserves (or on base money), and inflation can all be viewed as generating tax effects. Any analysis of optimal monetary policy in a steady-state equilibrium needs to consider the simultaneous choice of all the...

In this paper we rethink the NAIRU concept and examine whether it might have a useful role in monetary policy. We argue that it can, but success depends critically on defining NAIRU as a short-run concept and distinguishing it from a long-run concept like the natural rate of unemployment. We...

In standard solutions, the new-Keynesian model produces a deep recession with deflation in a liquidity trap. The model also makes unusual policy predictions: Useless government spending, technical regress, and capital destruction have large multipliers. These predictions become larger as prices...

We examine the potential policy role of monetary aggregates by attempting to use them as effectively as possible in the analysis of empirical relationships. We consider three possible roles: as information variables, as indicators of policy actions and as instruments in a policy rule. These...

This paper reviews the progress that the science of monetary policy has made over recent decades. This progress has significantly expanded the degree to which the practice of monetary policy reflects the application of a core set of quot;scientific principlesquot;. However, there remains, and...

This paper discusses what recent economic research tells us about exchange rate pass-through and what this suggests for the control of monetary policy. It first focuses on exchange rate pass-through from a macroeconomic perspective and then examines the microeconomic evidence. In light of this...